Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 180-199)



  180. I certainly do. Can you confirm, Mr James, that at the end of these meetings the conclusion was that Mr Spence was asked by someone, and I do not know by whom, how much contingency there was left in the Dome? They were told £30 million and he said "Thank you very much, we'll take that towards the zones" and that was where the contingency went?
  (Mr James) I cannot confirm that because I have been unaware of any note to that effect and have seen none[18]. May I just make one point for you which may be helpful to the analysis which you are drawing? It is shown in Table 8 that the original cost—and this is very important—of the central arena was to have been £137 million but fell to £38 million and that is because the area which it was to cover was in fact reduced, with the result that the outer exhibition area had to expand, which to some extent accounts for the higher expenditure on the development of the zones to which you alluded.

  181. May I ask Mr Young about a couple of things which were said? Mr Rendel asked about the sponsorship figure. The sponsorship has been one of the great disappointments of the Dome. It was originally budgeted at £175 million and fell to £150 million. Could you perhaps tell me why on 27 October 1999 in front of the Culture, Media and Sport Select Committee Lord Falconer said that NMEC deserves great credit for its achievement in raising over £160 million for sponsorship for the project. Over and over the critics have said it could not be done and they have been proved wrong. £160 million? He was counting his chickens a little early perhaps.
  (Mr Young) I thought Mr James got to a figure of £160 million in his answer to Mr Rendel.
  (Mr James) One hundred and sixty million if you include cash, value in kind and the replacement of the two zones.

  182. I thought it was less than that in the answer you gave to Mr Rendel a moment ago. I wrote it down as £82 and £40 something.
  (Mr James) One hundred and fifteen plus the £46.

  183. Of value in kind.
  (Mr James) Yes. May I correct that, the zone was built by sponsors, not value in kind: £85 million plus the value in kind, plus the zones built by the sponsors was £160 million.

  184. In his opening remarks the Chairman dealt at some length with the issue of solvency and a lot has been made of the guarantees which were demanded by the board in May some time. Was it 25 May? I believe you said you had received a letter about the indemnities.
  (Mr James) Yes, about the indemnities.

  185. Could I refer you to Lord Falconer's evidence to the Select Committee on 12 July this year? When that letter requesting indemnity was received, would Lord Falconer as the shareholder have been consulted about that? Would he have been informed of it?
  (Mr Young) I do not remember but I think it quite likely that I would have informed him about it.

  186. I asked him whether the board had asked for or received any guarantee of indemnity. He said that when a person takes on a job in a non-departmental public body, the Treasury will give an indemnity to that person. I said that I was not talking about personal liability but about NMEC as a board asking for some kind of guarantee that for instance on 22 May they would not be allowed to go insolvent, anything in writing, any phonecalls requesting a guarantee. To this he replied no. Why do you think he said that?
  (Mr Young) I may not have told him. The first answer he gave was correct, as you heard me say to the Chairman. In our view, which I may have got wrong, but I have been frank about what our view was, the existing indemnity cover did apply to the directors of NMEC. The answer Lord Falconer first gave, as I heard it, was correct.

  187. Then when I pressed him as to whether anything had been received in writing or through a phonecall he said no.
  (Mr Young) What I do not remember, and I did say that when you first asked me, is whether I had told him of the arrival of that letter between that time and the time he gave you that answer.

  188. I should like to take you back to Mr O'Connor's advice given to the Department on 17 May. I apologise to Mr O'Connor in advance that I am going to embarrass him again by referring to his letter to the Secretary of State of 17 May. He has been very honest and said he disapproved of the grant which was proposed. I do not think that the language he used in the letter has yet been expressed and I think it is important that it is on the record as to just how strongly he felt about it. He described the latest visitor numbers as very disappointing. He spoke of the board saying, "Their attitude did not bode well for the future and it will need to be confronted". He said, "Once again, the willingness of the Board and the Management Team to act differently to the way they have done in the past is critical". He gives a long description of why he feels it is poor value for money and he ends up saying that he hopes ". . . that we will now be able to move out of conflict and crisis". These were pretty strong recommendations which were coming to you as the Accounting Officer at the Department at the time from Mr O'Connor. Why did you feel that it was in the public interest that this extra money should be spent?
  (Mr Young) To be quite precise about this, what I think you have read out is an excerpt from Mr O'Connor's private advice to the Millennium Commission.

  189. It is to the Secretary of State in a letter dated 17 May.
  (Mr Young) As Chairman of the Millennium Commission; that is correct. That advice was then overtaken by the Commission's decision to go ahead with the grant. My position as superior Accounting Officer was not to comment on the Millennium Commission's decision vis-a"-vis their Chief Executive's advice, but to decide whether it was proper in my view for that grant to be paid. In answering the previous questions I explained the calculations I went through to give that answer.

  190. On costs of early closure, the costs of early closure have continually been used as the reason why it was better to pay an extra £90 million. I have the early closure costs in front of me. The mid case scenarios for closure at 20 June to close on 1 September, a decision on 20 July to close on 1 September or a decision on 20 August to close on 1 September, the mid case scenarios are all lower than the subsequent amount of money which has been paid.
  (Mr James) That is not correct, that is it is lower if you have to add the two together. The closure cost would have come on top of the actual amount which has subsequently to be funded for continuity.

  191. Is it not the case that in all of the closure costs, in all of the estimates which have been made, the figure for sponsorship and supply agreements, which presumably is to defend against any possible lawsuits from sponsors, have all been put in—I shall not give the amounts—at a fixed amount which is a very high amount indeed?
  (Mr James) You can take those figures right out of the exercise and it is still a substantial cost penalty over and above the actual running costs of the company which were necessary to get to 31 December.

  192. Mr Campbell asked you about costs of advisers. Are you able to tell the Committee how much was paid to IMG for their failed attempt to raise sponsorship for the Dome?
  (Mr James) Not without taking advice from my colleagues. If I may, I shall see whether we have a number for that? It is £2.8 million.

  193. That is quite a sizeable consultancy fee for no work at all. Can you also tell me about the progress of the lawsuit being conducted against the Dome by Koch Hightex.
  (Mr James) That one is regarded as a case in dispute and is one which we are resisting the payment claims on at the moment.

  194. Is it budgeted in the budget for a possible payment?
  (Mr James) We have indeed budgeted for it.


  195. You do not have to elucidate that.
  (Mr James) Thank you.

Mr Davidson

  196. May I start by asking you how much more money might be required from either the lottery or the Government to close off this whole exercise?
  (Mr James) I am very confident that the sum of £47 million which was confirmed in the grant of 12 September will be sufficient to enable the company to complete trading to the end of the year and complete the orderly windup and solvent liquidation of the company next year, subject to us fulfilling at that time our known contractual liabilities as they stand.

  197. That was carefully phrased. As a layman, do I take it that there will be no more money after the £47 million?
  (Mr James) I am confident that we will need no more money to discharge our contractual liabilities which are at this present moment to give back all the goods we do not own on 1 January when we cease trading.

  198. That is again a carefully phrased formulation. Is there anything I should be pursuing there if I knew enough to pursue it?
  (Mr James) The question I think you probably want to ask me is: is that going to be enough to clear the Dome, get the Dome off everybody's hands? The answer to that is that if there is thereafter a sale, or between now and then, of the Dome, then that sale may specify that they want more decommissioning. If that is so, then the cost of any further decommissioning will be deducted against the purchase price which they pay for the Dome. That is really the simple consequence of it.

  199. What is the range of costs that that might be?
  (Mr James) We see putting the Dome into a saleable condition as being in the order of £22 million for which we at the moment carry a provision of £7.5 million to discharge our contractual liabilities. We would not intend to go beyond that unless it were specifically to respond to a sale.

18   Note by Witness: Mr Spence did not attend the meetings referred to in Question 180 or any of the other meetings between the Shareholder and the Chairman/Deputy Chairman. Back

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